understanding opportunity and risk

minimising future risk       creating sustainable advantage       creating opportunity

THE CONSEQUENCES OF RISING ENERGY COSTS March, 2010

From an in-depth understanding of how the world is developing, of how many factors are interconnected, related and to a large extend dependant, we at Alt3 create what we believe to be a valuable insight into how the world is developing. We've been doing this for some time and, to be honest, we have been proven to be right on many, many occasions. We're not here to say "we told you so", but rather, to say "take seriously" the fundamental changes taking place that will affect every country, every business, every person.

This is knowledge you as a business need. It is leading edge strategic development.

A good example of this is oil. For approximately two years we have been sending out reports on the impending economic consequences of rising fuel costs. In keeping with many of our other assessments, we can clearly see those economic consequences of rising fuel costs about to impact. Make no mistake, this will soon start to undermine the fragile global economic recovery. Within 12 months this will be a serious impact and ... this will be a long impact. It isn't something that's going to go away within a short period of time. Therefore it is something we will have to live with and find a way around.

The trouble with the assessments we make, and one of the more predictable factors of human nature, is that we know - we just know - many people read what we write and secretly they think ... hmm ... this will be someone else's problem. It won't affect me. I'll be alright.

Honestly, this is something we have to struggle against quite often. And yet, time and time again what we say comes true - and we can hear the major decision makers coming out with the same words on every occasion - "we didn't know this was going to happen. It's a complete surprise. How could we have known?" Well ... you did know because we told you and we know we were right.

It's the same with the cost of fuel. It's a strange thing that at the moment the price of oil is approximately 2/3rds of what it was about a year ago - and yet the price of transport fuel is the same as it was then - and this time, the price of transport fuel will increase beyond what it had been. There are a number of reasons why this is so - but still it will happen and this is why it will impact the economic recovery and in not such a great length of time will seriously undermine the sustainability of a number of exposed regions of the world.

It's better late than never. Today we see across the world a number of energy developments taking place. The latest was the recent announcement of tidal and wave power development in the north of Scotland which will take 10 years to produce enough electricity for 750 000 homes. Across the world we see massive wind and solar power developments. These, and others, are good things to happen. Although, at present, they are only a fraction of what is and will be required - it's a start and in time the pace of development will increase. Well, it will have to, won't it?

While this type of development is very much required for national, regional and global progression (and is an essential for business) - and an investors dream come true - these are essentially for non mobile sources of energy need. They are for homes, offices, factories and labs. They are for computers and networks and lights and warmth. It isn't for transport. This is the major hole in the equation.

Business needs transport. Countries need cost effective transport. A progressing world needs transport. Without it many aspects simply grind to a halt. True, in a few years there will be many more electric cars. But cars aren't trucks, and trains and their tracks are hugely expensive to build. And anyway, with all the energy required for those homes and offices and factories and labs ... to add the extra and substantial burden of electric vehicles into the mix will mean the current growth in renewable energy sources will have to increase exponentially ... which, let's be honest, is unlikely.

Therefore what we are faced with is increasing energy costs on all levels, with transport costs increasing the most. This is what will start to impact the economic recovery and any development plans for any businesses. This is why it isn't someone else's problem. And ... we are putting this in writing so you who are the decision makers know. You can't hide behind the ostrich philosophy of "we didn't know it was going to happen. No one told us.".

The facts are as we've said. They are unavoidable. They are going to happen. It is too late in the cycle to avoid the consequences.

However ... there are things that can be done to (a) protect your business, and (b) to develop your business so you create and maintain that all important sustainable commercial advantage. This is the same for all businesses, in all sectors, regardless of who you are, where you are, what you trade in. Without it you are in for a difficult time - everyone will be. But ... those who do well and prosper will be those with the insight we can give them, and their own courage to take action now to develop in the near future. This is strategic development at its sharpest.

And the simple fact is ... if business progresses then national economies progress and individuals increase their standard of living. Governments need to do more to ensure the future development of their economies. It is very clear what needs to be achieved therefore in true strategic development style, it is very clear what needs to be done to achieve those specific goals. Stop blurring the issue and get on with what you should be doing. You should be in the job of making things better - we all should. Don't you dare say we didn't tell you. Not this time.

Regards

JS
 

If you don't understand the risks, how can you prepare? Can you afford to let the issues be blurred?

The turbulent 21st century

life isn't black and white

central@alt3.co.uk